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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Winkman777 who wrote (55870)	12/2/1999 2:12:00 PM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 95453

BHI's comments on the Oil Majors witholding Cap Ex spending untill - the sustainability of crude prices is established; is executive psychobable & excuse making. Just got back from Chicago O'Hare - lots of gas & energy being used in Chicago - "guarandamntee it." - missed the open and it looks like BHI is doing a HAL rerun here; leading the sector lower. Imho; we are facing a double edged sword here. That is that the "Momenteum" crowd is in control here. They keep wanting to merely dip their toe in here - uncommitted to a solid entry. They want to catch the wave, they know its coming - but are out just as quick as they were in; on the slightest wind shift... E&Pwise; crude up strongly today and many of the independant E&P's are in solid shape here; with dramatically improved balance sheets and via the flip side of hedging - they will now realize higher than market prices for Nat Gas in many cases here. The cash flow & earnings for most will still be substantially higher than last quarter & dramatically higher than the same quarter last year - with shareprices allowing nearly 30-50% upside to just the highs of this past September. The major story however - which flies directly into the face of the headline quote attached to the BHI earnings report; is that the independant E&P's "ARE" dramatically ramping up cap ex spending for 2000. SSB just released a report showing an average increase in cap ex spending for 2000 over 1999 of 22% for the independant E&P's they cover ! Here are just a few of the increases: UPR +56 % VPI + 54% NBL +51% APA +49% PXD +39% Those #'s are mind-boggling ! - the market can not & will not ignore this story much longer; it is compelling in what it will do for production, cash flow & earnings. What we are seeing here is more media - market manipulation & spindoctoring. Cap Ex spending is being dramatically increased by the independants, who have picked up many of the property divestitures from the Oil Majors during this period of recent M&A activity. The Street is choosing to ignore that very important fact here. Cap Ex spending has shifted to a degree here, to the large independents given the consolidation & property sales by the Oil Majors. The Majors may not "pre-announce" dramatic cap ex increases; but because of these mergers and property spin offs - that was expected. The major story is that the independants are not hesitating and in fact making some dramatic commitments to increased spending as shown by the Salomon Smith Barney Report. smithbarneyresearch.com The majors will soon follow, once their new houses are in order. Anyone who is betting against the sustainability of crude here - will lose. Again, the majors, integrateds & refiners have been on record as to shorting crude, talking prices down; both in an effort to lower expectations (good mgmt) and to also talk prices down as they in many cases need to buy crude on the open market for refining operations. The "Majors" will soon be following the large independants very soon here in increasing cap ex spending. They have their own set of"PR" priorities here given the historic merger activity of late and must appease the Street & shareholders with a conservative financial stance & do not forget they in some cases; have a vested financial interest in "talking down" crude prices. For the Majors - bet you ass, they'll be on the bandwagon... PS - look at crude today; the "story" of increased global demand and reduced supply - now teetering on a "point of no return"; sub 300 M boe in domestic storage. OPEC is a 110% sure bet imho, to comply. They have to... the only way they can EVER increase production and not get punished unmericfully by the futures trades (who control the price of Oil) is to bring the world to its knees with $30+ crude. Believe the story & trust the numbers; it's as simple as that ! PS... look at PXD today - up nearly 10% from its low a day, or so ago. We are teetering here, with the Mo-Mo crowd having their finger on the trigger, only a slight sentiment wind shift and its off to the races. Valuation anomalies like NBL - near a 5 year low and looking a 51% cap ex spending increase in the face for year 2000 with $7.00+ cfps at a multiple less than 3.0 x cfps for a large cap verus historic avg's of 7-9 x cfps ?!?!? Given the valuation multiples here near historic lows and the bet the market is making against OPEC; this may be the sweetspot of the decade for buying E&P stocks.